Extract confirms talks with Rio on uranium

Extract Resources
, holder of the huge Husab uranium deposit in Namibia, on Monday confirmed discussions with
Rio Tinto
on the potential joint development of the resource with Rio’s neighbouring Rossing deposit.

Rio, a minority shareholder in Extract, has long been seen as a natural partner for Husab given the proximity of Husab to the existing Rossing processing facilities and the weighty capital requirements to develop the resource, seen at more than $US1 billion.

Extract confirmed also that it’s in talks with its biggest shareholder Kalahari Minerals “to explore various options that might simplify the Extract/Kalahari shareholding structure."

The discussions were flagged by The Australian Financial Review in today’s Street Talk column.

Rio Tinto chief executive Tom Albanese has been voicing his optimism recently about the outlook for uranium and the company is known to be focused on potential opportunities at Rossing rather than at its majority-controlled Energy Resources of Australia unit which runs the Ranger mine in the Northern Territory.

But while speculation has focused on Rio potentially bidding for Extract, Monday’s announcement seems to back the view that the two are more likely to form a joint venture to develop Husab, which Extract wants to bring into production by 2014 at a rate of 15 million pounds per year or uranium oxide.

The surge in the uranium spot price, to over $US70 per pound from about $US40 mid-2010, has increased optimism about the potential for the development of new mines.

Extract also announced Monday that it will again seek to adjourn a general meeting of shareholders at which investors were due to vote on a placement of 7.3 million shares to Kalahari Minerals to raise $60.9 million. The placement would increase the stake in Extract held by London-listed Kalahari to about 43 per cent.